I’ve been on the lookout for opportunities to short sterling, and Prime Minister May’s speech seems to have given GBP/AUD its much-needed pullback. Take a look!
GBP/AUD Trade Idea
Pound pairs got a strong boost after May’s rah-rah statements while providing more details on the government’s Brexit blueprint. Even though she did reiterate that they’re prepared to forego access to the single market, she also emphasized that the U.K. does not want to be at odds with the rest of the bloc. May also confirmed that she will put the Brexit deal up for a vote in Parliament, which means that lawmakers will have their say before the breakup is made official.
However, sterling’s bounce seems to be more of a “buy the rumor, sell the news” reaction as bears probably booked profits off their earlier speculative short positions. May pretty much confirmed that a “hard Brexit” is likely, and this could bring a lot of uncertainty for U.K. companies and exporters. In contrast, the improved outlook in China seems to be supporting iron ore prices and the positively-correlated Aussie so far.
The 4-hour chart of GBP/AUD reveals that price is approaching an area of interest between the 38.2% and 50% Fibonacci retracement levels. This lines up with the 1.6550 minor psychological resistance, which might be enough to keep gains in check, but a larger correction could still reach until the 61.8% Fib near another area of interest at 1.6750-1.6800.
Stochastic is pulling up to show that buyers are in control of price action at the moment so I’d rather wait for the oscillator to turn lower before hopping in. If I’m able to short around my desired entry areas (1.6550 to 1.6750), I’ll set my stop past the 1.7200 swing high and my initial target at the 1.6025 swing low.
See also: Q4 2016 Trading Performance Review
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